Monday, September 22, 2014

Federal Judge Dismisses EEOC Lawsuit Against CVS

As a follow up to our an earlier post on this case, last Friday, a federal judge dismissed the lawsuit by the Equal Employment Opportunity Commission (EEOC) against CVS over the drugstore’s severance agreements. The EEOC, which enforces laws against discrimination in the workplace, alleged that the severance agreements routinely used by CVS illegally restricted its employees’ right to file discrimination charges with the EEOC.
This case has been closely watched, as many employers use separation agreements similar to those used by CVS. In fact, in its motion to dismiss, CVS argued that its separation agreement contained garden-variety provisions that other companies have used for years without EEOC challenge. The EEOC, as seen in its complaint, took issue with several provisions routinely used by employers, including:

  1. CVS’s cooperation clause, which required an employee to notify CVS’s general counsel if the employee received any contacts relating to an administrative investigation against CVS;
  2. A non-disparagement provision that prohibited employees from making negative comments about CVS;
  3. A non-disclosure provision that prevented an employee from disclosing confidential information without CVS’s permission;
  4. A general release of claims, covering any grounds by which CVS could potentially be liable to the employee; 
  5. A Covenant Not to Sue in which the employee agreed not to bring any lawsuit against CVS and pay CVS for any attorneys’ fees if the employee did file a claim;

The EEOC claimed that the severance agreement was “overly broad, misleading, and unenforceable” because it interfered with an employee’s right to file charges with the EEOC, participate in EEOC investigations, and communicate voluntarily with other employees.

As many employers use severance agreements with similar provisions, a ruling in favor of the EEOC could have been disastrous for employers, requiring them to restructure existing severance agreements and defend against lawsuits from those employees subject to these agreements.

The federal judge has not yet written an opinion explaining why he dismissed the lawsuit, but once this opinion is issued, check back in with The Workplace Report for further analysis.

While this decision comes as a relief to employers, this is likely not the end of the matter. Expect this decision to be appealed to the Seventh Circuit. Also, the EEOC has filed a similar suit against College America in the 10th Circuit. If the judge in that case rules for the EEOC, it may create a circuit split, making the law in the states covered by the 10th Circuit different from that in the 7th Circuit. Stay tuned to The Workplace Report for updates on this case.